The Senate subcommittee on Private Sector and Consumer Solutions to Global Warming and Wildlife Protection on Wednesday held the first in what promises to be a whirlwind series of hearings on the America’s Climate Security Act.

While Senators on the subcommittee disagreed about what the final version of the bill should look like, all agreed that it will be significantly different than the original piece of legislation put forward just last week by Sens. Joseph Lieberman (I-CT) and John Warner (R-VA), chairman and ranking member of the subcommittee, respectively. In the end, they said, the Climate Security Act is likely to include provisions added to appease critics from both the energy industry and environmental protection sides of the debate.

“Senator Warner and I understand that it is unfinished,” Lieberman said. “It is a work in progress.”

Lieberman and Warner have said the legislation will achieve substantial, long-term cuts in U.S. greenhouse gas (GHG) emissions (see Daily GPI, Oct. 19). The legislation would reduce total U.S. GHG emissions as much as 19% below the 2005 level by 2020 and as much as 63% below the 2005 level by 2050, they said. Lieberman and Warner have presented their new bill as the core of a new federal program that they said Congress should pass to avert “catastrophic global climate change” while enhancing America’s energy security.

“We believe that the problem of global warming grows more urgent each day and that the United States government has a responsibility to be part of a solution to that problem,” Lieberman said. “We must move with a real sense of purpose to get something substantial done to avert the worst possible consequences of global warning.

“Senator Warner and I feel good about the bill we’ve introduced. If enacted, we’re convinced it would achieve the greenhouse gas reductions and reduction in global warming that we need, and do so without adverse effect on America’s economy. In fact, we think it will stimulate greater economic growth,” Lieberman said.

The bill would control compliance costs by allowing companies to trade, save and borrow emission allowances, and by allowing them to generate credits when they induce businesses, farms and others to reduce their GHG emissions or capture and store GHG. The bill would provide free allocations of 20% of the emissions cap to manufacturing facilities in 2012, phasing out the free allocation by 2036, and provides free allocations of 9% of the annual emissions cap to states. It would phase in up to 73% of the annual emissions cap for auction by 2036, distributing 20% of the proceeds to low- and moderate-income energy consumers. Set-aside emissions credits and money raised by the auction of emission allowances would also be invested in deploying emission-reducing technologies and practices.

Citing the recent rejection of an air permit for a coal-fired power plant by the Kansas Department of Health and Environment and reports of plans for other coal plants around the nation being scrapped, Warner said the country faces “an urgent economic situation…with regard to our energy situation.

“This is why we’ve got to move, this is why the Congress must put forth a piece of legislation, enacted by the president into law, so that the private sector can move forward with a degree of certainty, so that they can get the necessary financing and permits and the like.”

Opponents have said the bill could further strain tight gas supplies and disrupt energy markets. Just hours before Lieberman called the subcommittee hearing to order, Duke Energy issued a statement commending Lieberman and Warner for their work on the legislation, which Duke said includes fundamental provisions necessary to effectively reduce GHG emissions but does not “adequately protect the economies of the 25 states that produce more than 50% of their electricity from coal.

“The Lieberman-Warner legislation would require utilities to purchase 60% of their allowances on the open market beginning in 2012. This would force consumers in coal-dependent states to bear the cost of buying allowances for existing plants, and also the cost of retrofitting or replacing their plants as new technology becomes available. This would result in an unacceptable ‘double hit’ for consumers living in the 25 states that receive the majority of their electricity from coal,” the company said. Duke also said the legislation does not adequately address allowance price spikes and volatility.

According to Duke, a better approach would be to allocate a larger percentage of the allowances to utilities based on their historic emissions levels and periodically reduce the allocations over time.

At the subcommittee hearing Frances Beinecke, president of the Natural Resources Defense Council, said U.S. emissions growth must be halted in the next few years and then cut by as much as 80% by mid-century.

“The goal is ambitious, but it is achievable. It can be done if we start now and reach an annual rate of emissions reduction that ramps up to 4% a year. But if we delay and the emissions continue to grow on the business-as-usual trajectory over the next 10 years, the annual emissions reduction rate that would be required to stay on the path of 450 ppm will double to 8% per year…basically, a slow start means a crash finish. We can not afford to wait until we are faced with the need to cut emissions by that 8% rate.”

Some senators said the legislation should open the door to greater use of nuclear power, while others said they worried about the effect the legislation would have on the country’s existing power industry and other businesses.

“This bill will cause massive fuel switching to natural gas, driving industrial users out of the country. This is a great fear that I have,” said Sen. James Inhofe (R-OK).

Lieberman said the seven-member subcommittee will markup the legislation and vote on it next week. If approved it will move on the full Committee on Environment & Public Works, which is due to hold its own hearings on the legislation.

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